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Home / India News / 2007 / February / February 8, 2007
Patni's 2006 Revenues up 28.5% at $578.9 million (Rs. 25,533 million), Net Income* up 30% at $ 79.2 million ( Rs 3,491 million)

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Patni's 2006 Revenues up 28.5% at $578.9 million (Rs. 25,533 million), Net Income* up 30% at $ 79.2 million ( Rs 3,491 million)

Mumbai, Maharashtra, India

Patni Computer Systems Limited (Patni) today announced its financial results for the fourth quarter and year ended 31st December 2006.

Performance Highlights

*Important note:

As stated in our Q2 2006 release for the quarter ended June 30th 2006, prior years' tax review by the IRS and a review by the Department of Labor of Patni's US operations had resulted in additional provisions which led to an increase in gross profit and operating income by approximately US$ 7.0 million and decrease in net income by US$ 19.9 million for Q2 2006 . Variations in Patni's Q2 2006 financial performance as a result of these reviews had been referred to as 'additional provisions' in the said press release. Financial Performance for the year ended December 2006 excluding these additional provisions have also been considered for comparative performance review with 2005 in this release.

Performance Highlights for the quarter and year ended December 31st 2006

-- Revenues for the quarter at US$ 154.3 million (Rs. 6,804.9 million)
-- Up 1.7% sequentially as compared to US$ 151.7 million (Rs. 6,970.9 million) in Q3 CY2006
-- For the year revenues at US$ 578.9 million (Rs. 25,533.1 million), 28.5% higher compared to US$ 450.3 million (Rs 20,242.4 million) for the previous year

-- Operating Income for the quarter at US$ 27.3 million (Rs. 1,202.3 million)
-- Up 8.7% sequentially from US$ 25.1 million (Rs 1,152.7 million) in quarter ended Sept 30, 2006
-- Higher by 24.1% at US$ 87.4 million (Rs 3,855.0 million) for 2006 (US$ 94.5 million (Rs. 4,167.2 million) with additional provisions) compared to US$ 70.4 million (Rs 3,165.8 million) for the year 2005

-- Net Income for the quarter at US$ 25.7 million (Rs 1,134.9 million)
-- Up 15.5% sequentially from US$ 22.3 million (Rs 1,023.8 million)in quarter ended September 30, 2006
-- For the year net income at US$ 79.2 million (Rs. 3,491.4 million) (US$ 59.3 million (Rs. 2,613.6 million) with additional provisions) compared to US$ 60.9 million (Rs 2,736.0 million) for the year 2005. Increase of 30.0% over the previous year (decrease of 2.7% with additional provisions)

-- The Board has recommended an annual dividend of 150%

-- EPS for the quarter at US$ 0.19 per share; US$ 0.37 per ADS

-- EPS for the year US$ 0.57 (US$ 0.43 with additional provisions) per share and US$ 1.15 per ADS (US$ 0.86 with additional provisions)

-- Stock based expense for the quarter was US$ 1.1 million for the quarter as compared to US$ 0.9 million during previous quarter. For the full year stock based expense was US$ 3.9 million as compared to US$ 3.5 million in 2005

-- Top Customer contribution towards revenue decreased to 13.5% during the quarter from 14.1% in Q3 2006. On calendar year basis top customer contribution towards revenue decreased to 14.6% from 22.1% in 2005. Revenue concentration of Top 10 clients is at 52.2% from 51.6% in the previous quarter. On Calendar year basis the revenue concentration is reduced to 53.1% from 59.3% in 2005.

-- Number of active clients was 239 at quarter end as compared to 235 in Q3 2006 and 199 at the end of 2005. Patni acquired 22 new clients during the quarter. On a calendar year basis we have acquired 92 new clients.

-- During the quarter we started operations in our new knowledge park at Airoli in Navi Mumbai. Phase 1 of this campus was commissioned and the next phase is expected to be operational by April 07.

Future Outlook:

-- Q1 2007 revenues are expected to be at US$ 155 million and net income (excluding the foreign exchange gain/loss) is expected to be in the range of US$ 22.5 million to US$ 23.0 million - taking the operations at a constant dollar value of Rs 44.40 per US$ for the quarter.

Management comments

Commenting on the Q4 2006 performance, Mr. Narendra K Patni, Chairman and CEO, Patni Computer Systems Ltd., said, "I am pleased to report a robust performance for the year on the back of higher operating efficiencies. This highlights our ability to deliver sustained growth by focusing on improving internal operations while increasing our reach to customers worldwide.

During the year we also realigned our management team with an aim to achieve greater focus and foster all round accountability. In line with our growth vision we recently commissioned our new facility in Mumbai. We believe this will enable us escalate our business across newer verticals and service lines.

Overall, we remain confident about our business momentum and continue to further expand the focus on improving internal efficiencies to deliver margin expansions."

Commenting on the performance, Mr. Mrinal Sattawala, Chief Operating Officer, Patni, said, "During CY 2006 we reduced dependence on our top 10 clients resulting in further diversification of our revenue streams, a key focus area for us. For the quarter under review we have added 22 new clients, bringing our tally of active clients to 239. Going forward, we expect to continue to our growth drive through leveraging our operating efficiencies."

Speaking on the occasion, Mr. Surjeet Singh, Chief Financial Officer, Patni, added, "During the quarter ended December 2006 revenues were marginally ahead of the guidance and operating margins improved with efficiency gains absorbing the Rupee appreciation impact. We shall continue to manage our cost base optimally as we move into 2007 and deliver profitable growth through a growing number of clients and service lines."

Revenues

Revenues during the quarter were marginally ahead of expectations at US$ 154.3 million (Rs 6,804.9 million) representing sequential increase of 1.7%.
For the year ended December 2006 the overall revenues were at US$ 578.9 million (Rs 25,533.1 million) growing by 28.5% from the previous year.

Gross profit

Gross profit for the quarter was marginally higher at US$ 54.8 million (Rs 2,417.7 million) against US$ 54.1 million (Rs 2,485.5 million) in previous quarter. After absorbing the net adverse impact of about 1% due to rupee appreciation during the quarter, gross margins were at 35.5% as compared to 35.7% in Q3 CY 2006.

Gross profit for 2006 was at US$ 208.7 million (Rs. 9,204.8 million) (US$ 201.6 million (Rs. 8,892.5 million) without additional provisions) as compared to US$ 161.9 million (Rs. 7,275.2 million) in 2005, an increase of 28.9%. Gross profit without such additional provisions increased by 24.6% for the year. Overall Gross margins improved marginally at 36.1% in 2006 as compared to 35.9% in the pervious year.

Selling and Marketing Expenses

Sales and marketing expenses during the quarter were at US$ 11.0 million (Rs. 485.0 million), unchanged as compared to previous quarter and as percentage of revenues were at 7.1%.

On a full year basis sales and marketing expenses were at US$ 43.1 million (Rs. 1,900.7 million) from US$ 36.1 million (Rs. 1,620.8 million). Sales and marketing expenses as percentage of revenues were marginally lower at 7.4% than spend of 2005 at 8.0% as a result of absorption benefits and productivity improvements.

G&A expenses

G&A cost optimization continued from previous quarter with marginal reduction in overall spend by US$ 0.6 million from US$ 16.2 million (Rs 743.7 million) in Q3 2006 to US$ 15.6 million (Rs 687.7 million) in Q4 2006. Overall spend as percentage of revenues reduced to 10.1% in Q4 2006 from 10.7% in Q3 2006

Overall G&A costs for the year were marginally lower at 11.6% (US$ 67.2 million) as compared to 12.0% in 2005 (US$ 53.8 million). Focus on G&A costs rationalization and optimization during second half of 2006 helped the overall containment of absolute increase of G&A costs.

Provision for doubtful debts

During the quarter, provision for doubtful debts was in line with the previous quarter at US$ 0.4 million (Rs. 16.6 million). For full year this provision was at US$ 1.2 million (Rs. 52.5 million), higher as compared to US$ (-) 0.2 million (Rs. (-) 6.8 million) in 2005.

Foreign exchange gain/loss

The quarter end rate for debtors revaluation was Rs 44.29. Mark to market impact of forex contracts taken earlier and revaluation of debtors at the quarter end, resulted in foreign exchange loss of US$ 0.6 million (Rs 26.0 million) for the quarter as compared to a similar foreign exchange loss of US$ 1.3 million(Rs 58.0 million) in Q3 2006. At the end of Q4 CY 2006 we have forex contracts worth US$ 202.0 million in the range of Rs. 44.70 to Rs. 46.85.

Operating income

As a result of net operating gains on SG&A and forex gain/loss change, the operating income was higher by 8.7% at US$ 27.3 million (Rs 1,202.3 million) as compared to US$ 25.1 million (Rs. 1,152.7 million). Operating margins were at 17.7% from 16.5% in the previous sequential quarter.

Overall operating income for 2006 was at US$ 94.5 million (Rs. 4,167.2 million). However the operating income without additional provisions was at US$ 87.4 million (Rs. 3,855.0 million) increased by 24.1% as compared to US$ 70.4 million (Rs. 3,165.8 million) during 2005 and operating margins for the year stood at 15.1%.

Other income

For Q4 2006, other income (including interest and dividend income net of interest expenses, profit/loss on sale of investments and other miscellaneous income) stood at US$ 4.5 million (Rs 197.8 million). There is a one time credit in this income of US$ 1.7 million on account of one time reversal of interest on tax provisions. On a normalized basis other income remains in line with previous quarter at US$ 2.8 million .

For the year total other income was higher at US$ 12.5 million (Rs 550.0 million) as compared to US$ 4.2 million (Rs 190.6 million) in 2005 due to increased interest and dividend income on investments.

Profit before tax

Profit before tax for the quarter was consequently higher by 13.2% at US$ 31.7 million (Rs. 1,400.1 million) as compared to US$ 28.0 million (Rs. 1,288.1 million) during previous quarter.

On a full year basis reported PBT was at US$ 106.9 million (Rs. 4,717.2 million). PBT adjusted for additional provisions was at 17.2% as compared to 16.6% in 2005. PBT without additional provisions was at US$ 99.8 million (Rs. 4,400.4 million), higher by 33.6% as compared to US$ 74.7 million (Rs. 3,356.4 million) in 2005.

Income taxes

Income tax for the quarter was at US$ 6.0 million (Rs 265.2 million) at an 18.9% effective tax rate on profit before tax . For the full year overall tax was at US$ 47.7 million (Rs 2,103.7 million). However without additional provision the overall tax was at US$ 20.6 million (Rs 908.9 million). The effective tax rate excluding additional provision was 20.7% in 2006 as compared to 18.5% in 2005.

Net income

Consequently, net income for the quarter was at US$ 25.7 million (Rs 1,134.9 million), an increase of 15.5% as compared to Q3 CY 2006 net income of US$ 22.3 million (Rs 1,023.8 million).

For the full year reported net income was at US$ 59.3 million (Rs 2,613.6 million). However, net income after excluding additional provisions was at US$ 79.2 million (Rs 3,491.4 million) 30.0% higher than US$ 60.9 million (Rs 2,736.0 million) in 2005.

EPS

EPS was at US$ 0.19 (Rs 8.21) and US$ 0.37 per ADS for the quarter.

Reported EPS for the year was at US$ 0.43 (Rs 18.94) and US$ 0.86 per ADS. However after adjusting for additional provisions, for the full year EPS was at US$ 0.57 (Rs. 25.31and US$ 1.15 per ADS) as compared to US$ 0.48 (Rs.21.76 and US$ 0.97 per ADS) in 2005. At the end of 31st December 2006, fully diluted outstanding shares were at 138.9 million.

Balance Sheet and Cash Flow changes

During the quarter, against net income of US$ 25.7 million (Rs 1,134.9 million), cash from operating activities was at US$ 31.9 million (Rs 1,406.0) net of changes in current assets and liabilities of US$ 2.1 million and non cash charges of US$ 4.1 million. These non cash charges comprise of depreciation and amortization of US$ 5.7 million, deferred taxes of US$ (-) 3.0 million, and other charges including stock option cost of US$ 1.4 million .

Net Cash used in investing activities was US$ 34.8 million (Rs 1,536.3) including capital expenditure of US$ 12.7 million (Rs 561.6 million),investment in securities of US$ 10.6 million (Rs. 466.4 million) and payment of acquisition related liabilities of US$ 11.5 million (Rs. 508.3 million)

Net cash inflow on financing activities was US$ 1.1 million (Rs 50.0 million) comprising of proceeds from common shares issued. With these changes and including revaluation of investments overall cash and cash equivalents (including short term investments) were at US$ 289.5 million (Rs 12,768.9 million), compared to US$ 270.1 million (Rs 12,413.3 million) at close of Q3 2006.

Receivables at the end of the Q4 2006 were at US$ 115.6 million (Rs 5,099.9 million) as compared to previous quarter at $ 108.4 million (Rs 4,981.6 million) representing a small increase in number of days outstanding to 71 days from 67 days. However when seen in conjunction with unbilled receivables there is no change in overall position of days sale outstanding.

Important Notes to this release:

Fiscal Year

Patni follows a January - December fiscal year. The current review covers the financial and operating performance of the Company for the fourth quarter ended 31st December 2006

U.S. GAAP

A Consolidated Statement of Income in US GAAP is available on page 3 of the Fact Sheet attached to this release


Percentage analysis

Any percentage amounts, as set forth in this release, unless otherwise indicated, have been calculated on the basis of the U.S. Dollar amounts derived from our consolidated financial statements prepared in accordance with U.S. GAAP, and not on the basis of any translated Rupee amount. Calculation of percentage amounts on the basis of Rupee amounts may lead to results that are different, in a material way, from those calculated as per U.S. Dollar amounts.

Convenience translation

A Consolidated Statement of Income as per Convenience Translation prepared in accordance with US GAAP is available on page 8 of the Fact Sheet attached to this release. We have translated the financial data derived from our consolidated financial statements prepared in accordance with U.S. GAAP for each period at the noon buying rate in the City of New York on the last business day of such period for cable transfers in Rupees as certified for customs purposes by the Federal Reserve Bank of New York. The translations should not be considered as a representation that such US Dollar amounts have been, could have been or could be converted into Rupees at any particular rate, the rate stated elsewhere in this document, or at all. Investors are cautioned to not rely on such translated amounts.

Attached Fact Sheet (results & analysis tables)


About Patni Computer Systems Ltd:

About Patni: Patni Computer Systems Limited (BSE: PATNI COMPUT, NSE: PATNI, NYSE: PTI) is a global IT Services provider servicing Global 2000 clients. Patni caters to its clients through its industry-focused practices, including insurance, manufacturing, financial services, telecommunications, and its technology-focused practices. With employee strength of over 12,000 and multiple offshore development facilities across eight cities; Patni has 23 international offices across the Americas, Europe and Asia-Pacific. Patni's service offerings include application development, application maintenance and support, packaged software implementation, infrastructure management services, product engineering services, business process outsourcing and quality assurance services.

Committed to quality, Patni adds value to its client's businesses through well-established and structured methodologies, tools and techniques. Patni is an ISO 9001: 2000 certified and SEI-CMMi Level 5 organization, assessed enterprise wide at P-CMM Level 3. In keeping with its focus on continuous process improvements, Patni adopts Six Sigma practices as an integral part of its quality and process frameworks. For more information on Patni, please visit www.patni.com.

IMPORTANT NOTE:
Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, liability for damages on our service contracts, the success of the companies in which Patni has made strategic investments, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. The company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.

To view the tables and fact sheet please click on the links given below:

Press Release

Fact Sheet

Gaurav Agarwal, Investor Relations, Patni US, +1-617-914-8360 investors@patni.com

Gavin Desa, Investor Relations, Citigate Dewe Rogerson India, +91-22-4007 5037 gavin@cdr-india.com

Source: Patni Computer Systems (Business Wire India)

Press release presented here is sourced from the Source mentioned above and is provided on as-is basis. Please contact the Company / Source directly for any further information in regard to this release. This website will be unable to assist you in regard to the accuracy or correctness of information in this release.

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